Wednesday September 26 was Yom Kippur – the annual Day of Atonement for Jews, the most solemn holiday on the Jewish calendar, when according to the relevant Scripture, God opens his Judgement Book, and takes applications from everyone with an interest in having the black mark removed from his name. God’s finger is moving; in Israel, where Michael Cherney lives, nothing stirs.

In London, according to records of the High Court registry, an application was lodged to postpone the scheduled restart of the proceedings in Michael Cherney v Oleg Deripaska until next Tuesday, October 2. Advocates for each side had already presented their opening arguments to the presiding judge, Andrew Smith, in July, before the court took its summer recess. The trial schedule had provided for witness testimony and cross-examination for several months, starting this week.
On Thursday, hours after the application was lodged, lawyers for the two sides, Quinn Emanuel for Deripaska (right image) and Dechert for Cherney (Chernoy, left image), agreed on the release of two almost identical statements.

Deripaska’s: “Mr. Deripaska announces that Mr. Cherney’s litigation in London against him has been terminated. Neither party will be making any further comment in relation to the litigation or matters raised therein.”

Cherney’s: “Mr Cherney announces that his litigation in London against Mr Deripaska has been terminated. Neither party will be making any further comment in relation to the litigation or matters raised therein.”

Russian lawyers advising Deripaska, including Rusal board director Dmitry Afanasiev, had invited settlement negotiations with Cherney before. Disgruntlement with their boss has been rife at Rusal for some time; there are signs that Deripaska and his advisors wanted to delay settling until after they had presented their defence to Cherney’s charges of lying, stealing and cheating Cherney of his 13% shareholding in Rusal. Their tactics depended also on waiting for Cherney to testify and undergo cross-examination by Deripaska’s advocate, Thomas Beazley. Afanasiev was hoping that Cherney’s testimony would prove as unbelievable as Boris Berezovsky had been in the High Court last year against Roman Abramovich.

The Cherney lawyers have been confident that the evidence in their case would be overwhelming, once the Deripaska team had assessed it and given their client a reckoning of the probability that Justice Smith would rule for Cherney. The timing of the settlement announcements, and the terminology, indicate that Deripaska lost his nerve. The reason for that is that others, vital to the survival of Deripaska in Moscow, also lost their nerve. The decision to settle before evidence in the case was tested in the London courtroom and broadcast back to Moscow wasn’t taken by Deripaska alone.

Lawyers for the two sides now say they cannot respond to any questions about the settlement. Spokesmen for Deripaska and Cherney are shtum. The financial terms are not known, and are not likely to be confirmed directly. Cherney will have been bound never to tell his side of the story.

In the settlement negotiations before, many intermediaries have appeared between the sides offering to broker a deal. A prominent Russian business figure close to the process has said it had been a condition of Deripaska’s side that the outcome should be understood as a withdrawal on Cherney’s part of his money and share claims, and a withdrawal of his charges that Deripaska was a liar, fraudster, contract cheat.

Cherney’s claims were based on a contract of March 2001 the two men had signed in London. Deripaska had been obliged by handwriting evidence and witnesses to drop his first defence that he had signed nothing. His remaining defence, that he had been forced into signing as part of an extortion scheme, had been dematerializing as his own records of his financial relationship with Cherney, before and after their London shareholding deal, headed towards open courtroom release.

The two-sentence announcement issued today does not declare a winner. More significantly, it confirms what has been Deripaska’s unbroken pattern – he has always settled the claims of his former contract and business partners rather than risk disclosure of the contract and accounting evidence, and cross-examination himself. The list of out of court settlements Deripaska has paid, rather than face public examination of the evidence against him, were reported in 2007. The winners included the Zhivilo brothers; Anatoly Bykov; the Reuben brothers; and Avaz Nazarov. The compensation paid to them totals about $610 million.

The risk points banks have charged Rusal to secure lenders against the probability that Deripaska would do to the loan contracts what he had done to his shareholding and trading contracts have created an even larger bill. Cherney’s challenge has been different from the precedents, in part because Cherney’s claim was the largest of all – 13% of Rusal today is about $1.2 billion, plus unpaid dividends, asset shares, and legal costs of another $1 billion. In part also, Cherney’s claim has been more important than those which Deripaska settled before because the documentary evidence, accumulated over twenty years, has been so telling against Deripaska’s believability.

Deripaska’s testimony in the High Court in the Berezovsky case, like his staged interview with the BBC, have revealed what his voice control and acting coaches have struggled to overcome. Watch for yourself. On the stand Deripaska makes a bad liar.

Had there been no settlement with Cherney and halt to the proceedings overnight, what was approaching was the disclosure of all Deripaska’s financial records, details of his relationship with members of the Yeltsin family, and evidence about others more important than them. Settlement negotiatiors on Deripaska’s side have identified who they are by name. In the uncertainty surrounding the deal terms these names appear to have required Deripaska to strike, their purpose was not to protect him, but themselves. A Moscow source involved has commented today: “I was sure that [name deleted] would never let OD come to the London High Court for cross-examination and to testify.”

Deripaska has a record in this case of violating the court’s confidentiality order. He leaked the witness list, for example, to Russian media as part of a campaign to intimidate witnesses on Cherney’s list. The leaks were also intended to deter potential witnesses who had been close to Deripaska and Cherney from the start, and knew which of them had been the boss. These included Alexander Bulygin, the chief executive of Rusal until 2009 and of its predecessor company, Sibal; as well as Andrei Raikov, who ran the Sibal and Rusal operations supplying the Russian smelters with alumina.

If Deripaska leaks again from the High Court case records, or if he, Afanasiev, and the Rusal “security” men, Victor Boyarkin and Valery Freis, violate the comprehensive confidentiality now imposed, what has Cherney received to assure him of an effective deterrent and settlement penalties? Since Deripaska’s signature on an undertaking is worthless – that’s what the Cherney case is about – there is only one guarantee Cherney could have taken to assure – money. A lot of it.

Deripaska’s reputation is now that of the boy who cried wolf (Cherney as gangster, standover man, etc.) too often. He needs the strictest of silence now, and so does the wolf – Deripaska’s silent partners and concealed shareholders. The silence covering them is Cherney’s victory.

In 2009, a sapient pig named Toby concluded what the stakes were in an out of court settlement between Deriapska and Cherney: “If Toby might be allowed the contemplation of a swinish irony, it is now in the Russian state’s interest to see Cherney paid out, and the prospect avoided of a High Court investigation of how Rusal has been operated, where the money has gone, etc. If Deripaska is to deliver value back to the state, as he has recently sworn to do, he must do exactly what Cherney has told the High Court he promised to do back in 2001 – protect Cherney’s stake from an unlawful takeover.”

But Deripaska’s court-doorstep bid to keep his wolf silent and well-fed, and retain direct control of Rusal himself isn’t over. There is another claimant in another active London court with the evidence to discredit the way Rusal has been run by Deripaska. That’s now Victor Vekselberg.